BigBasket & Grofers reportedly exploring a merger

Online grocery marketplaces BigBasket and Grofers India Pvt. Ltd are holding discussion for a possible merger, according to a news report by the Times of India.

Apparently, the discussions are in the preliminary stages only and if the deal goes through, it will be one of the most significant moves made towards bringing about consolidation in a cash-guzzling consumer internet economy, the paper said.

According to the sources, the talks between the two firms began last November and are now expected to be brought up during BigBasket’s board meeting scheduled later this month. However, everything depends on the BigBasket's next financing round, which if goes as per plans may put the deal in the backseat.

Similarly, with Grofers, SoftBank and Tiger Global, ploughing fresh funds into the merged entity could also change the course of talks. Both the startups refused to comment on reports when contacted and termed it mere speculation.

Despite huge fund-raising in 2015, Grofers faced tough time last year as interest around the express delivery sector has waned perceptibly. To save cash, Grofers kept trimming its business and cutting costs last year that slowed down its growth dramatically.

For BigBasket, though its sales grew 231 percent to Rs 563 crore in the financial year ending March 2016, but net losses skyrocketed to Rs 277 crore from Rs 61 crore, on the back of increased marketing spends like signing Bollywood actors Shahrukh Khan as a brand ambassador, spiralling cost per delivery, and expenditure incurred on setting up warehouses.

"It's a dilemma for Grofers whether to spend money or seek a merger. For BigBasket, it finds little value in Grofers' technology, customers or revenue," one of the sources told TOI.

"It's a different issue if Tiger and SoftBank want to talk a merger with follow-on investments. The hurdle to the deal making is the fact that BigBasket would dictate terms, but Grofers wouldn't give up because it still has a lot of cash left on its books,' he added.

Maybe we have to wait a little more to know how these discussions progress. Keep checking this space for more updates.